Who is Fossil Free UMC and what are you asking for?
Fossil Free UMC is a movement of United Methodist clergy and lay people who believe it is wrong for the church to profit from the fossil fuel industry in the face of climate change. They support legislation to add coal, oil and natural gas to the lists of industries in which church entities should not invest according to the socially responsible investment guidelines in the Book of Discipline and Book of Resolutions. Advocates are also calling the General Board of Pension and Health Benefits to screen petroleum and natural gas from its investments.
Is it hypocritical to screen fossil fuels from investments while still consuming them?
Ending fossil fuel dependency requires a multi-pronged approach. Even as individuals work to mitigate their carbon footprints, they are enmeshed in systems and infrastructure that don't support a low-carbon lifestyle. If we had more affordable, convenient choices for sustainable transportation and energy, most people would choose them. Fossil fuel companies are getting in the way of developing better consumer choices and transportation infrastructure rather than supporting them.
Politicians need to know there is public support for the change required to create infrastructure for renewable energy and to level the playing field for renewable energy companies to enter the marketplace and grow. Divestment is a means of showing that support.
The Fossil Free UMC legislation is a specific response to the denomination's Socially Responsible Investment Policy in section 4071 of the Book of Resolutions, which calls the church to invest in companies with responsible environmental practices and to exclude from investment companies that violate church values. This legislation is an attempt to implement existing policy and values statements.
Is calling for fossil fuels investment screens akin to rejecting modern civilization?
The legislation does not call for people to stop using energy. It calls the church to stop profiting from the energy sources that are driving climate change. Knowing what we know about the coming impacts of climate change, screening fossil fuels is an affirmation of civilization.
The General Board of Pension and Health Benefits is engaged in shareholder advocacy with several fossil fuel companies. Why not stay at the table with these companies and try to shape their policies rather than just walking away?
Scientists say that the only way to avert the worst impacts of climate change is to leave the majority of fossil fuel reserves in the ground. But the pension board will never try influence fossil fuel companies to leave their assets in the ground because share price is based on known reserves. If reserves stay in the ground, share prices plummet. This isn’t like trying to get Nike to stop making shoes in sweatshops. It’s like trying to get Nike to stop making shoes.
Is it possible to earn returns with a fossil-free investment portfolio?
Yes. All investing is inherently risky, but there is particular risk in remaining invested in fossil fuels. Financial experts have been studying the risks of remaining invested in fossil fuels given the potential that carbon assets will be stranded as legislation increases versus the risks of screening fossil fuels and investing in other industries. Findings show that for past performance, the impact of excluding fossil fuels is negligible. For the future, given the potential volatility of the fossil fuel industry, screening fossil fuels may actually reduce overall portfolio risk. See “Building a Carbon Free Equity Portfolio” by the Aperio Group and the MSCI ACWI Ex Fossil Fuels Index for details.
Does the church already have a “green” investment fund?
The Equity Social Values Plus Fund contains investments of nearly $1 million in 29 of the top 200 coal, petroleum and natural gas companies. There are twice as many fossil fuel companies in this fund as there were in the Balanced Social Values Fund that it replaced. It is not an environmentally-friendly option for United Methodists.
Does the pension board’s fiduciary duty get in the way of creating this type of investment screen?
No. Religious pension funds are a special case when it comes to fiduciary duty. The strictest standard for a secular pension fund’s fiduciary duty comes from a regulation called the Employee Retirement Income Security Act (ERISA). But the UM pension fund is a church fund, and the Constitution’s establishment clause (separation of church and state) allows a church pension fund to use religious values in shaping its investments. This is why the board can legally comply with Discipline para. 717 and screen profitable but morally objectionable industries like tobacco, nuclear weapons, and private prisons from its investments.
Nonetheless, in investment decisions not covered under Discipline para. 717, the church does hold the pension fund to the standard outlined by ERISA. This is described in Discipline para. 1504.14, which states that the board should, “discharge its fiduciary duties with respect to a benefit fund, plan, or program… for the exclusive purpose of providing benefits.” But even when following this standard, ERISA allows for some values-based discretion. ERISA says that non-financial considerations, such as environmental sustainability, can inform investment choices where an investor’s research demonstrates that returns are equivalent, or not harmed, by the choice. Research has established that this is the case for fossil fuel divestment (see previous question). If the UM pension fund undertakes a thorough and reasonable process to evaluate the literature on this point, and can demonstrate returns will not be harmed through screening, it will likely meet the ERISA standard.
Can fossil fuel companies be part of the solution? Aren’t many of them already investing in clean energy?
Despite convincing public relations campaigns, fossil fuel companies are moving away from clean energy rather than toward it. The major players are selling off their sustainable energy assets to invest further in exploration. They are also attacking state renewable energy policies. And this makes sense. Renewable energy is a threat to the fossil fuel business and the billions that companies have invested in exploration and extraction. Renewable energy requires completely different infrastructure and expertise. Just because a fossil fuel company is in the energy industry doesn’t mean it is equipped to build the technology needed for sustainable energy. The energy industry has the same diversity and breadth as the transportation industry. In the same way that we don’t expect railroad companies to start building airplanes, it doesn’t necessarily make sense to expect an oil company to start building solar farms.
What about energy access for people in the developing world?
Climate change’s impacts will be deepest for the world’s poorest citizens. The church should be investing in sustainable energy infrastructure in developing nations rather than saddling them with energy solutions that have no future in a sustainable world.
Big fossil fuel companies have billions of dollars. How can divesting the funds from a few religious institutions make an impact?
Divestment is a moral and political strategy. Just like in the struggle for Civil Rights in the United States or the fight to end Apartheid in South Africa, the more we can make climate change a deeply moral issue, the more we will push society towards action. We need to make it clear that if it’s wrong to wreck the planet, then it’s also wrong to profit from that wreckage. At the same time, divestment builds political power by forcing prominent institutions to choose which side of the issue they’re on. Divestment also starts to build momentum for moving money into clean energy, community development, and other more sustainable investments.